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Funding Your Startup: Five Options For Building Up Needed Capital

YEC Next is an invitation-only community for the world’s most promising early-stage entrepreneurs.

Creating a startup from the ground up is a labor of love. Often, there comes a time when it seems like more investment capital is needed to finance growth. As any entrepreneur knows, raising money is often a daunting task.

What are some creative alternatives to raising money from investors? And, is it always necessary to raise more funds, or are there other options? Below, five members of YEC Next explore creative alternatives that they have used to find capital or ways around needing it all together.

Members discuss a few ways you can approach raising startup capital for your project.Photos courtesy of individual members.

1. Scale Down The Idea

As an entrepreneur for 10-plus years now and growing a multi-million dollar business, it is definitely doable to build a business idea without raising capital. It's just a lot harder and comes with serious risk as you'll be grinding it out, but absolutely doable. You can focus on scaling down the idea to its minimum core, where you can afford the risk to prove the idea or model. Then, focus on generating revenues from that use case to propel you to additional capital sources (i.e. bank lines of credit as others have posted). In the end, no matter where you go, someone is going to ask you why you need the capital. A proven idea provides a use case for when that time comes. - Marcus Jimenez, Breefly

2. Consider Crowdfunding

I work with many clients in the motorcycle industry, and over the past five years there has been a huge uptick in crowdfunding campaigns such as those on Kickstarter or Indiegogo. These campaigns work very well for product-based companies, especially those that are creating something innovative. Beware of the fine print, though: all crowdfunding sources have different criteria, such as raising the entire goal to get any money. And if you're into any type of scientific R&D, begin with the SBA and apply for grants. - Ron Lieback, ContentMender

3. Borrow From Yourself

Depending on your appetite for risk, the existing resources at your disposal, and the number of backup plans you have in place, there are many ways to come up with cash to start or grow your business. Borrow against a life insurance policy. If you have a whole life insurance policy, you may be able to essentially borrow from yourself, with a relatively fast and easy approval process. You can also borrow against a 401(k). If your administrator allows it, you may be able to borrow up to 50% of your 401(k) balance, with a max loan amount of $50,000. Typically, these loans need to be repaid within 5 years. You may also be able to cross collateralize. If you have equity in your home, you could look into getting a Home Equity Line of Credit through your bank. - Seth Williams, REtipster Publishing LLC

4. Fund With A Side Hustle

Use a side hustle to fund your business. The easiest way to get started is by doing consulting work on the side. If you have a specific skill — such as coding, design, marketing, user experience, data science, etc. — turn that into a consulting hustle and use the income from that work to fund your business. - Jim Huffman, Growthhit

5. Learn How To Do More With Less

Do you really have to raise money? If it's an online business, most things can be built for free. Can you learn how to code? Of course you can. Raising money may actually increase your chances of failure due to your psychology (depending on how disciplined you are with money) and dependency on outside funding rather than profitability. The ability to build a business without funding builds good business discipline, such as doing more with less, being creative, high margin, thinking long-term, independence and efficiency. - James Hu, Jobscan

Young Entrepreneur Council (YEC) is an invitation-only, fee-based organization comprised of the world's most successful entrepreneurs 45 and younger. YEC members represent nearly every industry, generate billions of dollars in revenue each year and have created tens of th...